After careful consideration of the draft patent policy, Apple believes
I have been reviewing with interest the discussion about the
decision to legitimize the acceptance of web technology that
depends on patents that will be available on "reasonable and
nondiscriminatory basis" instead of simply a royalty fee basis,
and the accusation that this is basically a plot by some big
companies that failed to get in on the ground floor of the
development of the web to take advantage of their size and their
ability to develop new technology to insinuate their products
into the basic structure of the web, thereby creating a reliable
revenue stream. The argument further proceeds from the
assumption that the individuals who have been involved in writing
this policy, and presumably the individuals who will be implementing
it and deciding whether various standards comply with it (whether
RAND requirement is being satisfied), work for the companies who
have direct interest in the anticipated revenues.
I do not pretend to know whether these charges are true; nor do
I have the technical expertise to comment on whether the web so
badly "needs" access to technology that might be available only
on a RAND basis that the rules should be changed as is now being
proposed.
However, I am a litigator, and I am one who has been looking,
from a public interest perspective, at the question of whether
litigation is a sensible way to address problems that various
participants in the Internet community have brought to our attention.
In the domain name context, for example, we at Public Citizen
gave careful consideration to a proposed suit over the delegation
of authority to ICANN. In the end we decided to abstained from
litigation for the time being. Among other things, we were concerned
about the potentially destabilizing impact that this litigation could
have and about whether the end-result of the contemplated
litigation would be "better" than the current situation. But our
eyes remain open.
Assuming that my first paragraph above is an accurate summary
of the charge that the opponents of the change have put forward,
I should be concerned about the litigation possibilities that follow
from it. The "W3C's Response to Public Comments on the Patent
Policy Framework Working Draft",
http://lists.w3.org/Archives/Public/www-patentpolicy-comment/2001Oct/0189.html,
makes the point that it is not at all unheard of for standards organizations
to rely on RAND licensing. But this point also brings to mind the fact
that private standard setting bodies are constantly facing scrutiny
from antitrust regulators not to speak of private antitrust litigators over
the possibility that a standard setting body represents a cartel, or that
one of its standards or decisions constitutes or monopolistic device.
So, what happens when a group of companies set a rule that governs
a pervasively necessary communications system, that requires frequent
decisions about what prices it is fair for them to charge for the technology
that they are embedding in the system? Sounds like fair game for antitrust
litigation, no?
In this regard, the institutions that govern the various aspect of the
internet have walked a tightrope between being treated as "government"
entities, and being treated as private entities. The advantage of being
deemed government is that they are free of antitrust scrutiny; for example,
in defending against antitrust litigation Network Solutions has tended to
argue that its activities are so closely controlled by the Commerce
Department or other federal regulation as to be sheltered by the
government's immunity from antitrust litigation. Moreover, when activities
that were previously government have been turned over to private
entities, you have the question of whether Congress or some other entity
was required to consent to the divestment of what could be deemed a
government asset. On the other hand, if the governing bodies are
governmental then you have problem of who picked them and whether
various constitutional principles that apply to government bodies then
apply. In sum, there is an interesting tension between the avoidance
of the "government" label and the avoidance of the "private" label,
which is one key issue we considered on the question of litigating
ICANN's legitimacy.
It is questionable that the W3C could claim that it is a government body,
or could claim immunity from antitrust litigation on the theory that their
adoption of the RAND approach to patents, and then the inclusion of
RAND patents in standards, was undertaken pursuant to government
authority and direction. Moreover, a huge number of private interests
could be affected by the policies determined to be "non-discriminatory"
and by the fees determined to be "reasonable," and each such interest
would have standing to initiate antitrust litigation. Moreover, a successful
antitrust plaintiff can obtain an award of attorney fees against the
defendant, so there is a tremendous incentive for private lawyers to take
on this sort of case. In summary, litigation would almost certainly result.
Thus, we are concerned that the adoption of the approach that
permits the incorporation of RAND patents could lead to a tremendous
amount of litigation.
Presumably, this legal angle - - not only the question of whether such
lawsuits could succeed, but also the question of whether such litigation
would be sufficiently tenable that all of the transaction costs of litigation
would become inevitable if RAND licensing is allowed - - is something
that those who are making this decision should consider very carefully.
Paul Alan Levy
Public Citizen Litigation Group
1600 - 20th Street, N.W.
Washington, D.C. 20009
(202) 588-1000
http://www.citizen.org/litigation/litigation.html